Policy Makers Worldwide Have Moved to Stop Hidden Fees - Where is the United States?

 Today is the International Day of Family Remittances (IDFR), which was adopted by the United Nations (UN) General Assembly to recognize the more than 200 million individuals worldwide who send money home to 800 million family members. Today, we celebrate the resilience of workers who have faced a global pandemic, economic turmoil, and even natural disasters to send money across borders to their families.

As we recognize IDFR, we also must take a look at how policy impacts these payment flows, and where the U.S. has fallen behind. The average cost of sending remittances abroad is 6.4%, a long way from the UN sustainable development goal of 3% remittance costs by 2030. Unfortunately, one of the reasons costs stay so high is because of the billions lost in hidden fees. Banks and remittance providers often advertise low-cost, or even “free” services, while marking up the exchange rate as much as five percent or more.

Globally, real progress has been made to address these hidden fees. A powerhouse task force made up of the UN, World Bank, and International Fund for Agricultural Development (IFAD) recommended total cost transparency in remittances in late 2020. The Financial Stability Board (FSB) made a similar recommendation just this month as part of their target metrics for transparency in their cross-border payments initiative. The World Bank already emphasizes “total cost” on its remittance price tool, and has stated that, “[t]he single most important factor leading to high remittance prices is a lack of transparency in the market.”.